On the first working day of the Year of the Horse, the Renminbi performed strongly. In the afternoon, it broke through the significant thresholds of 6.89 and 6.88, appreciating 200 pips during the day, with the closing price reaching a new high since April 2023.
<h2>1. Customer Settlement Remains the Main Reason</h2>
The latest data on foreign exchange settlement and sales for January 2026 continues to show impressive results. In January, the bank's customer foreign exchange settlement surplus was USD 88.8 billion, slightly down from USD 99.9 billion in December 2025, but still the second highest since January 2013.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/539906c6-1a85-457d-b045-c3217da13f58.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/539906c6-1a85-457d-b045-c3217da13f58.jpeg"/>
It is noteworthy that two key data points reached historical highs since statistics began in 2010:
1. Net settlement under securities investment was USD 25.9 billion. This reflects the restoration of foreign confidence in Chinese assets, accelerating the allocation of Renminbi assets.
2. Forward net settlement was USD 39.3 billion. With expectations of interest rate cuts from the Federal Reserve, the USDCNY swap points have significantly increased compared to the previous two years, and the cost of forward settlement has also decreased. Coupled with the market consensus on Renminbi appreciation, export enterprises are no longer holding onto cash, choosing to lock in future exchange rates in advance. This also explains why the USDCNY swap points have been under pressure since January.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0879d0fe-145e-4893-ab30-4f17b81f68ad.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0879d0fe-145e-4893-ab30-4f17b81f68ad.jpeg"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/49952b0e-7d9a-4cdd-86e6-e8d1f6660211.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/49952b0e-7d9a-4cdd-86e6-e8d1f6660211.jpeg"/>
<h2>2. Marginal Improvement in External Trade Environment</h2>
After the U.S. Supreme Court ruled that IEEPA tariffs were illegal, tariffs in China and some emerging market countries have decreased. Although Trump immediately announced a new global tariff of 15%, it is still a 5% reduction from the previous 20% tariff on China (10% equivalent tariff + 10% fentanyl tax). Considering Trump's planned visit to China at the end of March, the likelihood of further additional tariffs on China in the near term is also relatively low, which has boosted market confidence.
<h2>3. What Expectations Does the Options Market Reflect?</h2>
However, the options market has conveyed a seemingly contradictory signal. Although the Renminbi continues to appreciate, the USDCNH Risk Reversal (RR) has been rising (USD Calls are more expensive than Puts), showing a divergence between SPOT and RR trends.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7dc8f206-c8a9-4b7f-a02d-b40b8a88c365.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7dc8f206-c8a9-4b7f-a02d-b40b8a88c365.jpeg"/>
The author believes that the rise of RR cannot simply be interpreted as the market's expectation of future depreciation of the RMB, but rather due to the foreign capital's demand for currency hedging when buying Chinese assets.
As mentioned earlier, the net settlement under securities investment has reached a historical high, with a large number of overseas funds aggressively allocating Chinese assets. For foreign investors holding RMB assets, the main risk they face is the potential depreciation of the RMB leading to asset shrinkage. To hedge against this risk, these foreign investors need to buy USD Calls in the options market, and this large-scale rigid hedging demand has pushed up the price of Calls, resulting in the rise of RR.
The rise of RR presents a good hedging opportunity for settlement clients. They can lock in part of the exchange rate risk through a risk reversal settlement strategy (sell call + buy put).
<h2>IV. Summary</h2>
The reasons for the appreciation of the RMB are, on one hand, driven by the demand for settlement from supply and demand, and on the other hand, by the marginal improvement in the external trade environment. The rise of USDCNH RR in the options market also indirectly confirms the hedging demand from foreign capital inflows into China. For settlement clients, they can seize the opportunity of RR rising and lock in part of their forward settlement exposure through a risk reversal settlement strategy.
Risk Warning and Disclaimer
The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at their own risk

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The Renminbi performed strongly on the first working day of the Year of the Horse, breaking through the 6.89 and 6.88 levels, appreciating 200 pips during the day, and closing at a new high since April 2023. In January, the bank's foreign exchange settlement and sales surplus was USD 88.8 billion, with a net settlement of USD 25.9 billion under securities investment, and a forward net settlement of USD 39.3 billion, reflecting the restoration of foreign confidence in Chinese assets. The external trade environment has improved, although Trump announced a 15% new global tariff, which is a decrease from the previous 20%. The options market indicates an increased demand for currency hedging of Renminbi assets from foreign investors

- On the first trading day of the Year of the Horse, the renminbi strengthened, surpassing key thresholds of 6.89 and 6.88, reaching a new high since April 2023.  
- Factors contributing to this appreciation include significant currency settlement surplus in January 2026 and improvements in the external trade environment following changes in U.S. tariff policies.  
- Additionally, rising risk reversals in the options market indicate foreign investment demand for currency hedging against potential depreciation of the renminbi.

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